NYC Whistle-Blower Suit Amps Dodd-Frank Shield

MANHATTAN (CN) – A federal judge gave unprecedented expansion to whistle-blower protection in a case against a company that allegedly tried to defraud New York City through a multimillion-dollar electronic toll project. Brooklyn resident Phillip Leshinsky, 63, says he “was instrumental in implementing the E-Z Pass toll collection system” for the Metropolitan Transit Authority’s bridges and tunnels department. Eight years after he joined the private sector in 1998, the Spanish company Telvant acquired his company, PB Farradyne, and another toll-collection company named Caseta a year later. After this string of acquisitions, Telvent allegedly discussed artificially inflating its bid on a contract with MTA Bridges and Tunnels. “Thus, in its bid, Caseta would be able to fraudulently make it appear that it was receiving a low profit margin, because by using its out-of-date figures, its overhead costs would be artificially inflated,” his complaint states. “This misrepresentation of Telvent Caseta’s overhead figure would help convince the MBT to award the bid to Telvent Caseta, because the MBT favors bidders with lower profit margins built into their bids.” Leshinsky said that executive Glenn Deitiker accused him of not being a “team player” after he objected, and his employers allegedly fired him in July 2008. On June 8, 2010, Leshinsky sued Telvent, its subsidiaries and executives under the Sarbanes Oxley Act, which forbids retaliation for whistle-blowing. The passage of the Dodd-Frank Wall Street Reform Act strengthened these protections less than two months after Leshinsky filed suit. Telvent tried to toss the lawsuit by claiming that Leshinsky filed too early to use Dodd-Frank to his advantage. U.S. District Judge J. Paul Oetken rejected that position on Monday, in a decision expanding the rights of corporate whistle-blowers. “The present motion requires resolution of a novel question,” the order states. “Prior to its amendment in 2010, Sarbanes-Oxley protected ’employees of publicly traded companies’ against retaliation for whistleblowing. … Dodd-Frank amended the statute to clarify that it protects employees of subsidiaries of public companies – not just those employed directly by public companies. Plaintiff’s claims in this case arose prior to the 2010 Dodd-Frank amendment, and the court therefore must address whether that amendment should be applied retroactively. “Because the amendment is a clarification of Congress’s intent with respect to the Sarbanes-Oxley whistleblower provision, the court concludes that it applies retroactively.” Whistle-blower protections should help those working in corporations and their subsidiaries, Oetken added. “In light of the fact that corporate malfeasance can – and often does – occur within subsidiaries of a public company, and that such malfeasance was precisely what precipitated the passage of Sarbanes-Oxley, it is certainly reasonable to infer that, in enacting whistleblower protections, Congress intended to protect the employees of a corporation’s subsidiaries in addition to employees of the parent itself,” the order states. Finding jurisdiction to hear the case, Oetken scheduled a July 23 hearing to prepare the case for trial.